Gloucester and Yancoal’s Noble aim

Gloucester Coal
and Yancoal Australia are considering a deal that would allow Gloucester’s major shareholder, Noble Group, to vote on the outcome.

This proposed structure indicates that the Hong Kong commodities trader is willing to retain a stake in the new entity. Sources said any deal was likely to be structured as a scheme of arrangement and might allow Noble Group, which owns 64.5 per cent of Gloucester, to reduce its stake in the coal miner but not exit the asset altogether.

Sources close to Noble pointed out that the trader’s general strategy was not to control coal mines or to own coal mines. Rather, it has a habit of building a significant minority stake in a company, help develop its mines and then sell down its holding to a smaller, cornerstone stake. This allows Noble to recycle the capital into developing other miners.

Shares in Gloucester and Yancoal Australia’s parent, Hong Kong-listed Yanzhou Coal Mining, were halted from trading yesterday after The Australian Financial Review revealed that Yanzhou had approached Gloucester about a merger. Noble’s support will be critical to the success of any deal and will go a long way towards reaching the 75 per cent of shares needed to approve such a scheme.

The key would be to structure a deal that would allow Noble to vote alongside Gloucester’s minority shareholders. Noble may be able to vote at any scheme meeting, provided its interests are aligned with those of other shareholders.

Minority shareholders yesterday promised to scrutinise Yancoal Australia’s asset valuations and the role Gloucester would play in any combined group before agreeing to any deal with the Chinese miner.

One of the key discussion points is understood to be the valuation of Yancoal’s mining assets, which are relatively unknown to the market because they are held privately.

BT Investment Management portfolio manager Tim Barker said it would take time for BT to re-acquaint itself with Yancoal’s assets, the bulk of which were acquired as part of its $3.1 billion takeover of Felix Resources in 2009. (Under that deal, Yancoal is required by Australia’s Foreign Investment Review Board to float 30 per cent of Felix’s assets on the Australian Securities Exchange by the end of 2013).